Business Leaders Respond The Inflation Target for 2025 Set at Around 2.5%
Thursday, 06 June 2024
The Indonesian Employers Association (Apindo) responded to the inflation target set by the Ministry of Finance (Kemenkeu) at 2.5% year-on-year (YoY) for the period 2025 to 2027. Apindo's Economic Policy Analyst, Ajib Hamdani, stated that in principle, high inflation is not a problem when its growth is maximized.
“Because with a significant ratio of economic growth supported by consumption, inflation will increase proportionally,” Ajib told Bisnis on Thursday (6/6). For instance, he said, when President-elect Prabowo Subianto targets economic growth to reach 8% in the third year of his administration, it means that by 2027-2028, inflation of 2.5% with a 1% deviation will not be an issue.
“This government target is outlined in the macroeconomic framework,” he said. Specifically, in 2025, Ajib predicts that inflation will tend to rise, as the government is also planning to set the value-added tax (VAT) rate at 12%. This policy, he said, will significantly raise the inflation rate.
According to him, if the government cancels the planned VAT rate hike and Bank Indonesia (BI) lowers the benchmark interest rate in the fourth quarter of 2024, inflation tends to be controllable at the 2.5% level.
According to records, Kemenkeu has set an inflation target of 2.5% yoy for 2025-2027 with a 1.0% deviation. This target is outlined in the Minister of Finance Regulation (Permenkeu) No.31/2024 regarding the Inflation Targets for 2025, 2026, and 2027. Thus, the inflation target is in the range of 1.5% to 3.5%.
The target is noted to be lower and more stable compared to the inflation targets in 2022, 2023, and 2023, which were at 3%, 3%, and 2.5% annually, respectively. Meanwhile, the Minister of Finance, Sri Mulyani Indrawati, has set a higher inflation target of 2.8% in the 2024 State Budget (APBN).
